YB new stock pitches (Thu, Jul 16)

Betterware de Mexico (BWMX), trading at ~$18 (roughly 5x forward EPS), is a Mexican direct-seller boasting 67% gross margins, 27% ROCE, 83% FCF conversion, ~25% EBITDA CAGR (2018-2025), and a 7% dividend yield paid across 25 consecutive quarters. Its moat is a distribution network of ~63,000 distributors and ~1.13 million associates (1.19M total, ~80% women) operating in Mexico's informal-economy 'colonias populares'—a market Amazon ($3B invested, only 11% population reach), Mercado Libre ($10.5B invested, 25 cities), and P&G cannot replicate because they operate at the wrong 'frequency,' requiring formal addresses, digital payments, and cost structures incompatible with these households; Betterware externalizes all commercial/logistics costs two layers below its P&L, recognizing revenue upfront when distributors buy inventory (e.g., a product sourced from China at 30 pesos sells to distributors at 90, then 110 to associates, 140 to consumers). The company sells anthropologist-designed home organization products across 9 catalogs/year (20-1700 pesos) and offers women a zero-cost, flexible income ladder (associate to distributor) that builds non-transferable social capital—a Costco-like durable moat proven during COVID (distributor/associate counts up 108%/94%) with the associate base growing again in 2025 for the first time since. Its 2022 Jafra Cosmetics acquisition (from Vorwerk) grew EBITDA 405% within nine months, now represents over half of consolidated revenue, ranks #2 in Mexican direct-selling beauty, and grew 10.9% vs. the market's 5% in Q2 2025, monetizing the same relationships as household discretionary income rises (lower-class wages up 60% 2022-2026). The key uncatalyzed catalyst is the January/June 2026 acquisition of Tupperware's Latin American operations out of bankruptcy at 3.1x EV/EBITDA (led by CEO Luis Campos, former Tupperware Americas President 1994-1999), which is immediately 40% EPS accretive, adds $81M annual EBITDA, 200,000 salespeople, manufacturing plants in Mexico/Brazil, and a perpetual royalty-free brand license across LatAm including the 215M-person Brazilian market. BeFra now spans three price tiers (Betterware, Jafra, Tupperware) plus growing international expansion (Guatemala +81% YoY Q4 2025, Ecuador ~20% monthly growth, Colombia launched early 2026). Financials are strong: 2025 FCF of MXN 1.78B (+24.6%), net debt/EBITDA improved from 3.07x (2022) to 1.56x (2025), with MXN 700M debt repaid in 2025; standalone FY2025 EPS was $1.46 ($2.11 pro forma including Tupperware, 44.5% accretion), 2026 revenue guided at MXN 14,800-15,400M with EBITDA margin ≥19%, and forward 2026 EPS estimated at $2.20-$2.40 fully integrated. At 10x earnings the stock is worth $22-24, and at 14x (still a discount to peers) $31-34, supported by a ~6.7% yield. Critically, in March 2026 founder Luis Campos filed his first-ever Form 3 (19.6M shares) and bought shares—the first insider purchase in company history—while CEO Andrés Campos Chevallier bought 10,000 shares at $16.81 in April 2026. Risks include currency (dollar-denominated China sourcing vs. peso revenues), the Campos family's 54.2% control plus a disclosed material weakness in internal controls, and integration execution risk given Tupperware's larger size, bankruptcy history, and already-reduced $278M Mexican revenue base that could erode accretion if it keeps declining.

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ServiceNow (NOW, added to position) is being bought pre-print on the thesis that it could see a serious positive re-rate post-print, as the stock is basically flat versus its last print despite major software divergences where 'darling' consumption/cybersecurity/identity names (DDOG, SNOW, PANW, CRWD, FROG, RBRK, OKTA, FTNT, QLYS, TWLO) are up 50-100% in 11 weeks while laggards (ADBE, CRM, HUBS) are down ~10% and TEAM is up 25%; the author argues software multiples are now vibe-driven rather than KPI-driven (e.g., Okta up 2x despite acknowledging no agent revenue, PANW at 25x sales, CRWD at 40x sales with no agentic measuring stick). The core thesis, backed by three dozen expert calls across the identity stack (platform engineers, CISOs, governance owners, a bank exec, a retail data-governance director), is that identity/authentication is not the AI bottleneck—governance and workflow are (who approved an agent, what data it can touch, tracing/auditing its actions, ownership when it drifts), and NOW is the governance enterprise substrate via its task-table architecture where every operational object extends a single task schema (enabling cross-domain agents), underpinned by four platform assets: State (CMDB/CSDM, fed real-time by Armis, 100B workflows and 7T transactions/year), Authority (assignment/role/approval graphs extended by Veza), Execution (workflow engine, IntegrationHub, MCP server, Action Fabric), and Evidence (journaled/audited records extended to AI via Control Tower and Traceloop). NOW also changed its pricing/packaging a week before its last print to make automated work billable rather than selling AI as an SKU, and the author views it as better positioned for the AI era than peers trading at multiples of its multiple, remaining a 'fallen narrative angel' that deserves more 'platform' love; risk/reward is attractive with downside to $95 and upside to $150.

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NorAm Drilling (NORAM.OL), a Norwegian microcap holding company (~$170mn market cap, ~$178mn EV) with a Houston-based Texas operator running 11 'ultra super-spec' rigs in the Permian Basin, is presented as the purest play on rising Permian rig count and day rates, paying a 12.9% monthly dividend (0.45 NOK/month at 42 NOK) while investors wait. The thesis rests on the Permian being the only credible short-term swing supply left amid an unresolved US/Israel-Iran conflict (the largest supply disruption in oil history), with Brent settling above the $70 level on which Chevron built its fully-funded 2030 Permian plan; shale's steep base decline (now 45-50%, losing ~3mbpd/year against ~6.8mbpd production) forces continuous replacement drilling, while the two offsets that masked declining rig counts—longer laterals (now routinely 10,000-15,000 feet, near mechanical/economic limits, masking declining tier-1 rock quality as the Permian is 60% through its best acreage) and the DUC completion backlog (down 75% from 3,500 in 2020 to below 800, with drawdown now essentially over at ~11 wells/month)—have both expired, meaning more high-spec rigs are now needed as breakevens have risen from ~$50 (2016) to ~$67. Demand concentrates in super-spec rigs (only ~450 of 613 working US rigs), and NorAm fits the ideal expression: no debt, a two-person executive team, ~300 employees, industry-lowest all-in cash cost of ~$24K/day, 100% utilization (~3,930 rig-days/year, so each $1,000 of day rate adds ~$3.9mn annual EBITDA), 7 of 11 rigs contracted to major E&Ps, a backlog worth ~16% of EV, and distributes all free cash flow monthly. The stock trades at 8x trough EBITDA, with the market pricing 2025's worst-ever year ($20mn EBITDA) as permanent; a return to 2023 conditions ($40mn EBITDA, when it paid $4.7mn/month in dividends vs. $1.3mn in late 2025) implies the stock doubles, aided by the observed ~10-month lag (0.8 correlation) between WTI peaks and realized day-rate peaks. Controlled by John Fredriksen (via Geveran Trading and SFL Corporation), known for buying cyclical assets at troughs and distributing through recoveries. Risks: not US-listed, illiquid microcap, a prior 72% dividend cut in the last downcycle, Fredriksen's Seadrill history (bankrupted twice, wiping out shareholders, though lessons on avoiding financial leverage atop operating leverage were presumably learned), and a return to low-$50s WTI would revert dividends and valuation to depressed levels. The stock repriced to NOK 53 in May before falling on perceived Iran peace; 2026 shows a breakout from the 2023-2025 descending channel with support in the $38-$42 range. The author recommends a long with a stop loss at NOK 35 (17% below current, allowing a 5-6% position sizing at 1% capital-at-risk), targeting 50-100% capital-return upside plus the double-digit yield, with downside capped if US-Iran tensions persist.

Read the full article here. Read time: 11 min